Plagued by political
uncertainties at the tail end of 2012, flat-rolled steel market
players say they expect pricing in 2013 to be on par with last
year, with both buyers and sellers expecting little to change
in terms of underlying steel demand.
We dont expect a
robust recovery, a source at one steel sheet and plate
Sources agreed that while they
expect an uptick in demand after the slowdown during the third
and fourth quarters of 2012, they believe overall demand will
be relatively flat year over year.
During the first part of 2013, you may see a little
activity because people are at low stocks and replenishing, but
whether 2013 will be stronger than 2012 ... 2012 was a weak
year and we dont see any dramatic uptick coming,
one mill source told AMM. People have curbed their
hopes that demand will be anything more than stable for steel
products, although some sectors will continue to keep the
For (2013), we think demand will be fine for the
industry as a whole, a flat-rolled service center source
said. He noted that the agriculture, automotive and energy
sectors are particularly robust and should help prop up overall
demand for flat-rolled steel products. According to Lexington,
Mass.-based consultancy IHS Global Insight Inc., automotive
demand in 2013 will continue to be strong. And the construction
sector is expected to remain relatively stable into 2013,
although some sources point to indications of a rebound.
Everyone is starting to
gain a little more confidence of a good, healthy recovery in
residential (construction) spending, which will boost
commercial (construction), a financial analyst said,
citing the American Institute of Architects architectural
billings index (ABI), a leading indicator of construction.
Toward the end of 2012, architecture firms reported strength in
business conditions, with the ABI rising for a fourth
consecutive month in November.
Construction is tending in
the right direction, a second mill source said. I
think the back half of the year will be better than the
first. In nonresidential construction, I think
theres huge pent-up demand.
Steel gets its biggest building
boost from commercial construction, which is lagging
residential construction, the financial analyst said. Without
demand from the construction sector, domestic mills have been
muddling along at capacity rates just above 70 percent, sources
noted. Raw steel production in September hit 70.4 percent, its
lowest point of 2012, according to data from the American Iron
and Steel Institute.
It is unlikely the utilization
rate will change much in 2013, according to Charles Bradford,
president of New York-based Bradford Research Inc. He noted
that with the former RG Steel LLC out of the mix--the Sparrows
Point, Md.-based steelmaker filed for bankruptcy protection in
2012 and is no longer operating--the overall industry rate will
tick up a little bit, but not by much.
Sources agreed that it will take
a construction rebound to push operating rates higher, but not
everyone in the steel industry is convinced a construction
rebound is on the horizon for the second half of 2013, or even
early in 2014.
Ive been hearing
that for years, the flat-rolled distributor source said,
noting that the steel industry has been hoping for a rebound
every year since the economic crisis.
Im looking at a
tough row to hoe here, said a source at a distributor who
specializes in coated materials for the construction
Other major steel consumers,
such as heavy machinery producers that are major consumers of
heavy steel products, including plate, have dimmed their
outlooks. For example, mill sources pointed to concern over
Caterpillar Inc.s more-pessimistic outlook for 2013.
And amid the uncertainty over
demand and business conditions, sources agreed that sustained
pricing volatility is not going anywhere in 2013.
A strengthening in flat-rolled
steel prices toward the end of 2012 likely will start to
dwindle halfway through the first quarter of 2013, steel buyers
January and February look
strong, the first sheet distributor said, noting that he
expects raw material costs to continue to support steel
products pricing for at least the first couple of months of
Mark my words, come
February the bottom will fall out, a second flat-rolled
distributor source said.
Some noted that the uptick in
pricing for flat-rolled products came thanks to a series of
price increase announcements rather than any change in
This masks the real
situation relative to demand, the coated materials
distributor source said. We get caught up in these
short-term spikes ... (but) weve got an overcapacity
What will happen beyond the
first quarter in terms of pricing strength remains to be seen.
Its month-to-month, a second plate and sheet
distributor source said.
Regardless of the uncertainty,
one thing is certain: Steel market players are managing their
expectations of any growth in steel demand in 2013.
Overall, our expectations are that (2013) will be in line
(with 2012), a third mill source said.